By Patricia Seybold

In conference rooms around the globe, brand managers and manufacturing executives are huddled in secret strategy meetings. Their goal: Sell their products directly via the Internet without alienating their retailers and dealers. Why the cloak of secrecy? Powerful retailers and dealers have been making it clear that if the manufacturer goes directly to the Net, they'll stop selling its products in their stores.

Manufacturers and retailers are engaged in a power struggle over who owns the relationship with the customer as they go online. Yet there's a new business practice that's about to explode on the Net. I call it "manufacturers' aisles." Think of it as an online store in a store that is managed by the supplier. In the future, manufacturers will take a proactive role by providing all of the product data customers need to make buying decisions. In essence, manufacturers will manage the electronic shelves or aisles that display their wares on hundreds or thousands of retailers' Websites.

What manufacturers, retailers, and dealers failed to notice is that the power struggle they're engaged in is an irrelevant one. Customers are now in control. The factors that the customer values are convenience, easy decision-making, good value, high quality, exquisite customer service, and product availability. Which of these factors is most important to which customers will depend upon the respective customer and the context. It's a mistake to assume that price/value is always the main determining factor in most customers' buying decisions. In today's time-starved world, convenience and product availability are often the top criteria.

The player that is best able to deliver on all of the customer's value criteria is most likely to win her business. The customer may attach brand loyalty to a manufacturer/ supplier (say Hewlett-Packard), or to a retailer (Circuit City), or to an aggregator/infomediary (CNET) that makes her life easier, or to a niche supplier (Joe's Art Supplies) that understands her needs. What's different in the new game is that the manufacturer/ supplier can win big no matter how or where the customer prefers to purchase. Having your products in a few exclusive outlets is not the right model for ebusiness. Having your product information available in thousands of targeted locations is.

Next step: Manufacturers' aisles

Many women shoppers are aware that the cosmetic departments in most large department stores are managed not by the retailer, but by the cosmetics companies. The cosmetic suppliers-Estee Lauder, Revlon, Clinique-own these sections of the stores and staff them with their own knowledgeable personnel. In cyberspace, manufacturers should all create the cyber equivalent of manufacturers' aisles. In fact, the Web is perfectly suited to this task. In cyberspace, you don't need to stock physical inventory, nor provide a subject-matter expert in every retail location. Instead, you can provide your up-to-date product information to the retailers' sites electronically and update it overnight. Many customer questions can be answered through well-designed customer information sections, FAQs, and technical support forums that may be housed on the manufacturer's site and seamlessly linked to the retailers' sites. Suppliers can even provide phone and email support with experts linked directly to the retailers' sites.

Maintaining and managing the detailed content and decision-making attributes for each product in each category is a very time-consuming and labor-intensive process. For example, Circuit City, a well-known clicks-and-mortar retailer, aids the consumer's decision-making process by providing its own set of criteria for each category of products it sells. These criteria are backed by essays that describe and explain the key distinctions in each category. Circuit City is obviously investing a lot of time and effort to ensure that it offers the best decision-making information about the categories and products it carries.

Only the largest online retailers and infomediaries will be able to afford the continued investment required to keep each supplier's product information up to date. This content-management burden will reduce the number of players considerably, and will force suppliers to sell their products through the largest and most competitive channels. Product profit margins will erode. Customers will do more comparison-shopping. And they'll have less brand loyalty to their suppliers.

Stepping up to the plate

If manufacturers want to own the customer's branded experience with their products, they need to take responsibility for disseminating all of the product-related information the customer needs to buy and enjoy the product. It's clearly in the best interests of the product supplier to manage the detailed content about its own products (see "Managing the Content," p65). You'll need to think carefully about what key information your products require. But guess what. The way to do this is to design this information for the end-customer as if you were selling directly. Then make this information available to all the channel partners through which you wish to distribute your products.

Obviously, if retailers, aggregators, and infomediaries can get this kind of rich information from each of the suppliers of the products they offer, and if the suppliers keep their information up-to-date, it will eliminate much of the retailer's current practices of re-keying and revising product information. However, the retailer also wants to add to the customer's convenience and to make it as easy as possible for the customer to make a purchase from him as opposed to the manufacturer. What value-added information should retailers or aggregators provide? They should add pricing and availability, as well as merchandising offers. They should determine which product attributes to display. They should add customer reviews and comparisons with other products.

New practices, new business models

Maintaining and syndicating up-to-date product information is only the first step in the journey for manufacturers and retailers. There are new business models that will emerge as well. Some retailers will restrict manufacturers to promoting only the items they carry. Others will want manufacturers to include their entire product line and to give the retailer a commission for sales generated on products the retailer does not stock and fulfill. Some retailers might want the manufacturer to handle fulfillment; others will prefer to stock and fulfill their own products. On the flip side, some manufacturers will link customers directly to specific retailers' sites and inventory, based on distribution agreements; other manufacturers will let customers choose which retailers they'd prefer to buy from. In any of these cases, managing real-time inventory and fulfillment across distribution channels looms as the next major challenge. But first, let's tackle the content.

It's high time for manufacturers to take ownership of the customer's branded experience with their products. In the past, manufacturers have offered photographs, descriptive copy, logos, and so on. But until now, they haven't managed and updated the content on retailers' Websites. That's about to change!

Business 2.0 magazine, February 2000